Private Health Insurance in 1973: A Review of Coverage ... · Private Health Insurance in 1973: A...

Private Health Insurance in 1973: A Review of Coverage, Enrollment, and Financial Experience

I

In 1973, about three-fourths of the civilzan population were covered by private health insurance for substantzal portaons of their costs for hospital and surgwal care. Lesser numbers u?ere cotiered at least 6% some part for other health care costs, usually after payment of deductibles and coznsurance. Private insurers returned $21.6 billion (or 88 percent) of subscribers’ premiums in the form of such payments. Insurance companies continued to domi- nate the market in providing coverage for hospital and physicians’ services, prescription drugs and dental care, and most nursing sertices

The economx stabzlixatzon program continued to be a factor throughout 1973 in. the slower rate of growth of both income and benefits. The gap between growth rates of income and benefits narrowed, as well.

IN 1973, 3.2 MILLION more Americans gained economic protection through private health insurance against their costs for hospital care; 2.3- 4.2 million more persons gained some coverage for physicians’ services and health care services provided outside the hospit,al.

The health insurance industry-Blue Cross- Blue Shield, the insurance companies, the independent community, employer-employee-union, and private group clinic plans, and health maintenance organizations (HMO’s) -met a high proportion of hospital and surgical care costs for three-fourths of the population and a mide- ranging portion of expenditures for other sorts of medical and health care for smaller propor- tions of the population. Insurance paid for most of the cost of in-hospital physicians’ visits and out-of-hospital X-ray and laboratory examinations in behalf of ‘73 percent of Americans. Thirty-four percent had some coverage for home and office visits, 60 percent for prescribed out-of- hospital drugs, and 10 percent for dental care. A third of all Americans had coverage for nursing-home care ; 57-59 percent had some protection against the costs of other nursing services.

*Division of Health Insurance Studies, Office of Re- search and Statistics The author was assisted by Paula A. Piro.

BULLETIN, FEBRUARY 1975

by MARJORIE SMITH MUELLER*

The trend toward broad comprehensive coverage of health care services is unmistakable. The depth of coverage, however, is a function of benefit levels, exclusions, restrictions, and dollar costs met. Konhospital related services covered by private health insurance plans are almost always subject to deductible and coinsurance payments by the insured. Hospital and surgical care plans frequently have age limits, deductible and copay- ment provisions, and/or maximum payments for services. Hospital coverage usually has some limitations with respect to duration of benefits, kinds of illnesses eligible for care and treatment, and other special conditions; surgical coverage often involves waiting periods, restrictions on specific services or conditions, and exclusions.

Virtually all persons aged 65 and over have health insurance coverage, mainly through the Federal Government’s Medicare program. As of January 1, 1973, the total number enrolled for hospital care under Medicare was 21.0 million ; for supplementary medical insurance the number was 20.4 million. These figures are based on an actual count from the health insurance entitle- ment master file. In 1973, 12 million (57 percent) of the aged bought private insurance, in most cases to supplement or complement their Medi- care coverage. Private health insurance plans for the aged mainly fill some or all of the gaps in the Medicare program-deductibles, coinsurance payments, drugs, etc.

Despite the growth of private insurance in the health care field, an est,imated 41 million Ameri- cans under age 65 have no economic protection through private insurance against hospital costs; 42 million have no insurance for surgical cate. The health insurance industry’s own estimates are much lower: 17 million without, hospital insurance, 28 million without surgical insurance. Undoubtedly, some Americans who could afford to buy private health insurance choose not to do so. Many other persons receive assistance with these costs through such programs as Medicaid (medical assistance), the civilian health and

21

medical care program for the uniformed services (CHAMPUS), the Veterans Administration programs, State disability insurance programs, and workmen’s compensation.

for operating expenses, with a resulting net underwriting loss of 1.8 percent of premiums.

In fiscal year 1973, for example, Medicaid payments were made in behalf of an estimated 20.9 million persons. These were, for the most part, children (45.2 percent) and the poor, including persons aged 65 and over (16.8 percent). Some of the latter were undoubtedly covered by Medi- care; their Medicaid payments were for care not authorized under Medicare. Some Medicaid re- cipients may also have had private health insurance that did not cover all their care or had exhausted their benefits. It is known, however, that in 1974 the Meclicaid program still excluded an estimated 9 million poor persons. Only 40 percent of the poor in the labor force had even limited private insurance against health care costs, and fewer than 10 percent had insurance against nonhospital services.l Because the degree of overlap in coverage by public and private plans is not known, the number of persons who have no economic protection against health care costs is not easily determined.

POPULATION COVERAGE

Office of Research and Statistics (ORS) estimates of the net number and the proportion of the population having private health insurance coverage for hospital care and surgical services are used in this article together with the estimates of the Health Insurance Association of America (HIAA). Both sets of estimates shorn a continued growth during 1973 in the number and percentage of the population covered. The reader will note that the ORS and HIAA estimates are frequently several percentage points apart, probably due to differences in reporting methods. The true figures lie somewhere in the range between the two sets of estimates.

ORS estimates of the net number of different persons and the percentage of the population with private insurance coverage in 1973 for hospital care, various physicians’ services, and other major types of care are summarized in table 1. Although more than t,hree-fourths of the population mere covered for hospital and surgical care and close to that proportion for most other physicians’ services, the actual dollar protection for these services ranged widely: 75 percent of all consumer expenditures for hospital care was met by private insurance but only 48 percent was met by insurance for physicians’ services, and only 7 percent for other types of care. The small proportion of reimbursement for the latter reflects not only the proportionately lower rate of coverage-only 10 percent of the population had coverage for dental care and only 34 percent had insurance for physicians’ home and office visits- but also the limited benefit levels for such services. Until basic health insurance plans become more comprehensive in scope and/or major medical insurance and extended benefits are more

TABLE 1 -Estimates of net number of different persons under private health insurance plans and percent of population covered, by age and specified type of care, as of December 31, 1973

I All ages

-. I Under sge 65

- I Aged 65

and over

Consumer expenditures for private health insurance in 1973 totaled $24.5 billion in premiums and subscription charges, up 9.7 percent from 1972. Benefit expenditures by pkivate health insurance organizations reached $21.6 billion, 10.7 percent higher than the 1972 total. The organizations paid out a little more than 88 percent of premium income in benefits and 13.7 percent went

Type of *ermcc “&Y-

(in thou-

sands)

Per- cent of ci- ~ihen

z:: tion

. _

--

Nbuem (in

tbou- sands)

%? (in

thou- ands)

Per- cent Of ci-

vilian

sp tlon

Hospital care _________ Physicians’ servfces

Surgical services...- In-hospital viskx-. X- ray and labora-

tory examinations _____--____

Office and home vlslts _-______---__

Dental care __________ Prescribed drugs

(out-of-hos@tal).... Private-duty nursing. Visltmg-nurse

service-- _________ Nursing-home we-..

152,797

70,038 21,626

124,971 118,805

122,688 69,152

75 8

75 1 73 4

73 1

33 6 10 4

69 8 66 9

ii:

146,089

145,352 144,692

143,995

Z:%

120,987 115.175

117,872 62,621

’ Karen Davis, “National Health Insurance,” chapter 8, Bettzng Natioftal Priorities, The 1975 Budget, The Brookings Institution, 1974.

HIAA estimates Hospltsl care _______ 182,079 Surgxal services-... 169,416

170,256 159,462

78 0 12,386 67 4

77 6 11,661 77.2 8,869 E!

76 9 8,802 40 8

35 2 4.158 11 4 234 ‘f f

% 3.934 3,630 2 ii

62 9 4,816 22 3 334 6,531 30 3

22 .1,823 9,964 iif

-

22 SOCIAL SECURITY

widely held, the bulk of the cost for these health son not eligible for group coverage holds two or care services will continue to fall directly on the more individual insurance policies, usually to consumer. supplement each other because of limited benefits.

ENROLLMENT

Gross enrollments-the total numbers of persons enrolled by all types of health insurance organizations for each of 11 services-are reported

-in tables 2-4. Estimates of the net number of dif- erent persons covered-wit,h duplication within the industry and among the insurers eliminated- are reported as calculated by ORS and by HIAA. The gross enrollment for persons of all ages for hospital care was 225 million (table 2). Accord- ing to ORS projections of the 1972 Household Interview Survey, 158 million different persons were covered for hospital care in 1973. Thus, 67 million or approximately 30 percent of gross enrollment represented multiple or duplicatory coverage. HIAA estimated such net coverage at 182 million. Multiple coverage occurs chiefly in these ways : (a) When both spouses are employed and both have group insurance through their employer ; (b) when a person with group coverage purchases an individual insurance policy to supplement his group plan; and (c) when a per-

Blue Cross plans over the country had 72 million persons under age 65 enrolled for hospital care at the end of 1973 (table 3). Blue Shield plans had an additional 2 million persons enrolled for that type of care. The commercial carriers covered 82 million persons under group policies and an additional 47 million persons under individual policies. Independent community, employer-employee-union, and private group medical clinics provided hospital care for an estimated 8.6 million persons.

The gross enrollment for surgical care ap- proached the level of hospitalization insurance. Blue Shield plans accounted for 64 million persons under age 65, with nonaffiliated Blue Cross plans reporting an additional 3.7 million persons. Group insurance policies issued by the companies accounted for 83 million persons; an additional 34 million were covered by individual policies. Independent plans covered above 11.5 million. The vast majority of their enrollment is through employment, groups-only a small percentage enrolled through individual memberships. Blue Cross-Blue Shield enrollment figures include both group and nongroup subscribers.

TABLE 2.-Enrollment under private health insurance plans for ersons of all ages and estimates of the net number of different persons covered, by type of plan and specsed type of care, as o P December 31, 1973

[In thousamls]

Type of plan Hospital care

Total gross enrollment ______________ 225,948

Blue Cross-Blue Shield ____________ _ ____ Blue Cross ____________________________ ;;%: Blue Shield _______________ _ ___________ 2:14.5

Insurance companies ____._______________ 134,338 oroup Indivi B

0lides __--________________---- 83,459 ual policies ____________________

Independent plans ______________________ 6yg

Community.. ________________________ 33538 Employer-employee-union ____________ Private group clinic ___________________

“42

Dental service corporation ____________ _________

Net number of different persons covered, as estimated by-

ORS __________________________________ 158+;7; Percent of civilian population r-----

RIAA ________________________________ 182i;7; Percent of cfvihan populations ______ .

aross enrollment as percent of different

ois _ - - -____ I - __-___--_--__-- - ersons covered as estimated by-

HIAL:.: _____ :.:-: ______-______-- :. 142.0 132.0 118.0 118 8 123.6 122.3 119.0 Cl

- I

E 8

--

--

- -.

-

Physfcfans’ services

lurgical ervices

207,124

:-ray and

l%&* sxamin- ations

181,256

74”.l3;

7&X8 119,853

84,026 35.830 12.132

:E ‘145

.----_-_

7;g

68:103 98,107 yg

11:22n 6,930 5,145

145

153,481 73 4

‘““is

‘““4”:

8

- 4 Dental vision

office care care nd home visits

Pre-

s~%ii (out+f- .ospital)

?rivab Visiting- duty nurse

lursing service

y~elx-

care

--

131,lM)

3Y88 b,

3% 6:805 5.417 1,728 3,999

.___-_-_

124,637 128.678 --

35,344

I:{ 3%m6

81,559 SC1559

7%‘i $7;

7;:;g

7:913

2:99o 6.218 2.635

20 10 .________.________

70,469

40.228

JL75 22.069

x2 ‘776

2,yg

._____--

124c:i

$1

104.9 (9

118i?i 122.688

68.7

$1 $1

69,152 33.1

13

104.9 104.9 (9 (9

101.9 (‘1

163 5 loo 0 .e._..w *e PI (9 .mm_.v*w-

3 Based on Bureau of Census estimate of 203,954,COO as of Jan. 1,1974.

l-

r Data not available.

BULLETIN, FEBRUARY 1975 23

A total of 13.3 million persons aged 65 and 4 million were enrolled for drugs. Most private older were enrolled for hospital care, 5-11 million insurance coverage was purchased by those aged for various physicians’ services (table 4). Only 65 and older in an effort to fill the gaps in the

TABLE 3.-Enrollment under private health insurance plans for persons under age 65 and estimates of the net number of different persons covered, by type of plan and specified type of care, as of December 31, 1973

[In thousands]

-r - Physicians’ services

‘rivate- ‘isiting- duty nurse

1ursing %SVke I

x Hospital c*re

Dental care

Type of plan :-ray and

‘“tE- OWce

and hmn :xamin- visits ations

In- h;;tg81

3urgiCal services

-_

._ ,_ ._ ._

,_ ,-

,_ .- -

Total gross enrollment _____________

Blue Cross-Blue Shield ________________ Blue Cross ___________________________ Blue Shield __________________________

Insurance companies .__________________

Ei?? 8” licles -_-_-___--------_-----

ual policies ___________________ Independent plans _____________________

Community _-_-__-- _ --______-______. Employer-employee-union ___________ Pnvate group chnic. ________________. Dental service corporation __________.

Net number ot different persons cov ered, as estimated by-

OR8 .________________________________ Percent of civIlian population z----

HIAA ______________________________ _ Percent of civilian population ‘-me-

Gross enrollment as percent of differenl

O~~-~~-~r’ra~-e~-t-~t~~ byT HIAA _____ ::.: ____________ ::...:::.:

211.765 196.110 171,760 --

65,375 3,394

61,981 95,838

Z% 10:547

5,672 4,749

126 .-- .___-.

144,592 77.2

143.155 76.4

118 8 120.0

171,354 109.6a86 21.392 127,036 126,934 123,766 63,873 6,818

6,562 6,471

126

1;,67;

4:963 126

:d% 1:917

129,109 82,272 46,837

8,599 3,356 6,119

124 - _ _ _ _ _ _ _.

67.788 3,722

64,076 116,850

a$.;;;

11:462 6,672 6,664

126 -*_--_-_.

146,089 78 0

170,256 90.9

‘““i!“G” 159.4k2

85.1

145 0 134 9 124 4 123 0

21,392 11.4

8

loo. 0 (9

8!)380 7&

b:OfB 1.648 3,432

8 ._______

115.175 117.872 61.6 62.9

105.0 (1)

105.0 (9

607

‘2 211 3:913 2,175

123 .__.___-__ .-_____-_ -_--__-_- I

143,995 65,880 76 9 35 2

1 Data not available. f Based on Bureau of the Census estimate of 187,370,OOO as of Jan 1,1974.

TABLE 4.-Enrollment under private health insurance plans for persons aged 65 and over and estnnates of the net number of dif ferent persons covered, by type of plan and specified type of care, as of December 31, 1973

[In thousands]

i- - -

I

--

--

-. - -.

,

I

-

Physicians’ services

Pre- scribed drugs

(out-of- 1ospits1)

3,884 18.5

$1

102 0 (9

-

x

P

nursing

102 a (9

Visiting- N;;z;g nurse

service Ci3Pl Type of plan -ray and

‘~~7 OffiW

and home !XSJUh- visits ations --

9,902 4,810 --

IS;012

kI,4

2vbE 2,502

2:SOS 1,616 1,404

306 676 2

3% 259

19 “E .--_____- _______ __

112 5 115.7 (‘1 (9

Vlsioll care

477

$1 47

P

I

9 430

fii 12

.-.----em

._____---

.________

._--_-_-_

.-___---_

. _ _ _ _ _ _ - _

krgical services

11,014

7,;;;

y96;

1:165 1,841

670

i;

. _ _ _ _ _ _ _

11.561

9?5f: bl

95 3 110.6

Total gross enrollment ______________ 13.283 234

10

8178

178 _____-__.

46 22

2 0

ff:

$1

100.0 (‘1

---L- Blue Cross-Blue Shield I________________

Blue Cross.-.-.---.---._.------.------ 7,484

Blue Shield _______________ i ___________ 7,;;

Insurance companies ____________________ Croup pohcles.. ______________________

5,229 1.187

Individual policies ____________________ Independent plans ______________________

4,042 570

Community ________________._________ 182 Employee~mployer-union. _ ___ _ _ ___ __ Private group chnrc ___________________ “ii Dental service corporation ____________ _________

Net number of dif?erent persons covered, as estimated by-

ORS __________________________________ Percent of cw~hsn populations......

Uk;8i HIAA... ____ _ ____ _ ____ _ _________.____ ll,Si3

Percent of cwhau population de----- 64.8

Cross enrollment as percent of different ersons covered as estimated by-

OL- ___-------t -------- - -_______ HIAA: ___________________ :.:: ________

107.2 112.3

1 Includes disabled persons under age 65 2 Mainly coverage of Medxare deductibles.

1 Data not available 4 Based on Bureau of the Census estimate of 21,584,COO as of Jan. 1, 1974.

24 SOCIAL SECURITY

TABLE L-Percentage distribution of total gross enrolhnent under private health insurance plans, by age, type of plan, and specified type of care, as of December 31, 1973

Age group and type of plan

Total, all ages _________. loo 0

Blue Cross-Blue Shield _______ 36 2 Iusurance companies ____-____ 69 7

Group policies _____________. 37 1 Individual pohcies _________. 226

Independent plans ___._______ 41

Under age 65, total ______- loo 0

Blue Cross-Blue Shield _______ Insurance companies ________.

Qroup pohcies ---- _ _--_-___. Indwidual policies __________

Independent plaIls ___________

Aged 65 and over, total.-.

35 0 61 0 38 9 221

40

190 0

Blue Cross-Blue Shield _______ Insurance companies. ________

Group licies ______________ Indivi 8” ual policies __________

Independent plans ____________

Hospital we

66 3 39 4

3: : 43

PhysIcfans’ services I I

-3 Dental =re ii!i!3i: In-hospital laboratory OfRce and

lcta 0 loo 0 loo 0 loo 0 loo 0 1M) 0

36 3 % 34 3 30 2 67 9 69 2 59 9 ;10736 8 8” “ii 2 52 3

!J i 291

ii:

68 62 6’5 ii 39 i ::

loo 0 loo 0 loo 0 190 0 190 0 loo 0

346 38 1 32 7 29 2 ‘E : .E i tit 61 1

;y % 288 67 62 8 2

‘6’ i ‘oe : E -7: 97 39 Ii :t

loo 0 109 0 loo 0 loo 0 loo 0 loo 0

66 6 Ei 607 27 3 32 5 10 6 11 6 29 4

E -30 7” i 62 5 76 1 49 0

16 7 12 8 31 4 4 61 72 68 13 0

__----_ :i i~6-

Medicare program-deductibles and coinsurance payments, as well as at least some of the services not covered by the Federal program.

Enrollment Shares

Private insurers continued to share the market on about the same basis as in 1972 (table 5). Insurance companies held well over half the total gross enrollment for all types of care except nursing-home care. Enrollment in individual policies was substantial for hospital and surgical care but represented only a fraction of group coverage for all other services. Blue Cross-Blue Shield

. claimed 2840 percent of the enrollment for all services except dental care (8 percent) and nursing-home care (57 percent). Independent plans had only 4 percent of the market for hospital care and drugs, 6-10 percent for physicians’ services, and 40 percent for dental care. The distribution pattern was about the same for enrollment of persons under age 65, but Blue Cross-Blue Shield dominated the market with respect to enrollments of persons over age 65, except in the area of drugs, dental care, and private-duty nursing.

Historical Data

For all ages, insurance coverage for hospital and surgical care-in terms of total enrollments

BULLETIN, FEBRUARY 1975

Visiting- nurse

Nhyzee

service care

loo 0 loo 0

305 67.1

F% i! ;

ii :4

loo 0 loo 0

29 7 539 ii: 41 9

!o” “i 42 :

35 8 48 7 87 9 637 49 0 %i 2

lo” : 10 3 8 6 __.----___.- 39

by type of insurer and the net number of persons and percentage of population covered from 1940 to the present-is detailed in tables 6 and ‘7. Blue Cross-Blue Shield enrollment rose 4 percent in 1973. In the previous 7 years, the annual gain was 3-5 percent, except in 1971 when the increase dropped to 1 percent for hospital care and 2 percent for surgical care. Insurance company individual policies continued to grow at a faster rate than group coverage-6 percent for hospital insurance and 8 percent for surgical services, compared with a 1-2-percent gain in group policies.

In 1973, HIAA again revised downward its estimates of net coverage for 1965-72 to reflect more current information with respect to the extent of duplicate coverage and to take into account revised estimates for nonreporting companies. The remaining several percentage points difference betTyeel HIAA net estimates and estimates based on the household surveys probably result from a combination of overreporting by health insurance organizations and underreport- ing in the household surveys. Thus, gross enrollments for hospital and surgical care, as estimated by HIAA, have been running 15-23 percent above HIAA’s net in the 10 years before 1973, and the household interview estimates have ranged from 28 percent to 41 percent above the National Center for Health Statistics (NCHS) net for hospital care and from 20 percent to 31 percent above net for surgical benefits.

25

TABLE 6.-Hospital benefits: Gross enrollment under private health insurance plans for persons of all ages and estimates of the net number of different persons covered, by type of plan, 1940-73

IIn thousands]

I

Qross enrollments

Insurance companies

- I

- I Independent plans Blue Cross-

Blue Shield

“,“p ye=

Total

-- 1 Per-

Pri- cent

of TtEp Number c;z- Numbe]

1LniC

peoz

-

I

-_

-

Per-

ation

‘,1”,!- ua1

policies

;71tp CiCS

dedi al so. :iety

Blue cross

Blue Weld

Total Total rota1

IOU

-I-l-

2: FJ I ---____ .--____ I 100 97 6 2

ii: _______ _______ 106 112 8 5

__--- 440 _________ _______ 12,a12 390 _________ _______ 32,068 220 -___-____ -____-_ 76,639

45 -____--__ ------- 105.452

1940..-- 12.022 6,072 6,012 1945-0. 32,135 18,961 18,881 1950.... 81,691 37,645 37.445 1955.-m. 118,629 48,924 47,719

67,464 57,960 59,618

ix;:

L%i 67:613 70,510 73,211

KE 7&05 81,641

55,938 56,489 58,133 69,141 e&478 61,651

EEi $;g

72:942

:tE 79:395

iz 210

1,206

:s% 1:485 1,557 1,951 2,012 2,230 2.325 2.652 2.691 2,622 1,966 2,283 2,146

-

3.700 2,600 10.504 7,804 39,601 22.305 E3.160 39,029

85,405

i%;i $;g$

102:597 106,266 109.303 113.727 119.425

t%z 131:22U 134,338

65,218 56,920 68,949 62,424

2% 5%; 75:363 79.300 81,956 gm;

a3:459

30,187 30,817 32,440 33,710

EE 371333 36,624 38,364 40.065 42.008

2% &0:879

2.250 2,670 4,445 6,646 6,994 7,102 6,937 ;a& 6:984

8,545 8,693 9.169 -

iii 1,445 2,9M

:%: 1:830 1,954 1,859

:% 2:m 2,W7 2,672

;:g 3:538

110 200

%J

Ei

iti

i .____ .____ .____ .-___ .--_- .____ .____ ._--_ -

al _ _ _ _ _ - _ _ _ - _ _ _ _ _ _ 67 _________ 80 129,800 --j~-~-

60 126,047 67 0 188 _ _-_ -_ ___ _ _ __ _ __ 61 ____--___ ______ * 61 -_____-__ -_-____ 53 145,454 73 9 20 150,888 75 9 g -i~-osj-

46 ----: ----

--ij-8-

_______ 60 165,253

140 *1b8,47s :t Ii

130,007 133,876 138.045

167:858 172,306 176,800 178,417 182,079

72 3 ____-__ 114 6 73 4 _______ 114 1

:t : 2 0’ 114 114 4 9 76 6 _______ 116 1 ;; ; :-:---- - ---- 116 4

ii; :;;:i ::: 116 i 6 83 6 _______ 84 9 136 2

;; ;

85 6 _______ 120 6

:; : ::i i 123 122 6 6

mates for 1965 and later years have been revised. * Estimated by a lying HIAA percentage Increase in net enrollment from

1972 to 1973 to the w CHS figure for 1972

1 Number estimated by applying percentages to total cvihan population Percentages projected to end of year and rounded for 1962 and 1973

s Estimate exceeds gross enrollment for early years because HIAA data include estimated enrollment of college and university health services Esti-

TABLE 7.-Surgical benefits. Gross enrollment under private health insurance plans for persons of all ages and estimates of the net number of different persons covered, by type of plan, 1940-73

[Numbers in thousands] -

Gross enrollments Net number of different ersons Qross

covered, as estimated E y- enrollment

Household surveys 1 I

*0EP

HIAA estimatid by-

Per- cent

of n- Number cfivz- Number

P opu-

ation

Per- 1 “zt Hfo~

:ivil- ian

sur- HUA

,opu- vets

ation

- ,Blue Cross- Blue Bhleld

Independent plans

End Of

year

-

Corn. mum

ItY

-

2,760 3,026 3,003

E 3:4w ;.g

4:132

:*E b:lOO 6,350 6,930

-

Pri-

Total

-

Total

-

2.250 2,420

“6:;:

7,336 8,494 p&

8:297 8.684 ;.3$

8: 762 9,959 0.532 0.860 1.4Kl 2,132

Em- ploy- w-em- ploy-

ee- un- ion

1,489 1,460 1,950 3.200

:% 4:695 4,806 4.963 6,063 4,801 4,500 4,476 6,300

%z a:ooo 6,057

-

dedi. also- :iety

-

110

ii

E

“2 10

._-_-.

._---.

.___-.

.-__-.

.___-.

.____.

.____.

.____.

Indi- vidual

E’,‘t

Total

Qp;;p ChS

Blue Blue Cross Shield

--

___--__ 127 2,g

1,151 16,102 3,194 34,201

3.773 44,493 3,048 46,326 yg j;m;

3:222 51:251 ;.y7 pg

3:416 57:017 3,464 69,815 3,629 62,966 3,874 65,236 yg f&m;;

4:098 71:038

Total :roup :linic

-

:: 270 170

210 231 243 250

z 198 180 143

:3”: 130

:z

I-I-

:%- 19s.L: 1955...

:~~: -: 1962.:. 196x.. 1964... 1965-q. 19&L.. 1967-e. 19tx.. 1969-m. 1970... 197L.. 1972-m. 1973*..

4.790 ;;a;

101:s19

134,118 139,988 143,989 150,361 154,117 160,460 164,380 170,486 175,978 185,239 192,078 194,642 199,896 207,124

260 2,336

17,253 37,395

48,266 49,374 bO.876 62.371 54,473 66,330 67,916 60,443 63,279

2x! 70):395 72,433 75,136

2,280 1.430 7,337 6,537

34,937 21,219 58,494 39,725

78,516

i%~: ;p;

95: 446 98,139

101,473 103,947 108,694 112,436 113,387 115,973 119,856

72,098 75.102 78,932 81,620

Ei: 84:026

850

2% 18: 769

23,012 25,061 25,757 27,398 27,988 29.907 29,970 29,375 28,845 29,762

KE 33: 231 35,830

4 1 _- _--__ 89 5 9 6 _______ 93 8

35 8 64 0

I -*-_-_. loo 3 ______.

I 114 6

,_-_----- -mm-v.*

I I

6,3Lw ,________ _______ 12,890 ,________ --_____ 54,166 .________ _______ 38,856

65 2 _______ E :E

:;4”; 113 9

69 7 _______ 114 6

74 9 121 1 768 1200 116 3 g ; -iis-s‘ :;; ;

g ; -ii~-s- ;;; :

81.1 132 0 122 3

‘iii-;~- --~-o‘ ;;;A$

12Oo:b28 65 0 ;;f:;:; ,____ ____ _______ _-----_- --_-___ 134:440 __-_-___ --_-___

148:082 iii-osi-

-_--_-_ n;,;;;

72 74 2 5 147:435 152,638 _--_--__ --_--__ 157,205 150,001 73 9 161.240 iii-i. -_ _---- 163.060 156:913 73 76 6 1 169,416 164.819

1 See footnote 1, table 6. *See footnote 2, table 6. 8 See footnote 3. table 6.

26 SOCIAL SECURW

Household Interview Surveys

The net number of different persons and the percentage of population covered, for persons under age 65 and for persons aged 65 and older, are presented in table 8. The estimates are based on household interview surveys conducted by the NCHS in 1962, 1967, 1970, and 1972 for hospital care and surgical services, and in 1970 and 1972 for physicians’ visits in home and office. Figures for 1973 are ORS projections of NCHS 1972 findings.

Data with respect to those aged 65 and over are significant in that they show a sharp drop in private insurance coverage in the first full year of Medicare but a steadily rising number and percentage of that age group buying health insurance since that period. As noted earlier, private insurance plans available to those aged 65 and older are designed primarily to complement the Medicare program by filling the gaps-deductibles, coinsurance payments, and in some instances services not paid for by Medicare. Other plans, however, provide flat weekly or monthly payments to the aged-only if they are hospitalized- to be used by the insured according to his financial needs.

Benefit *Structure

The benefit structure of private health insurance continued to broaden in 1973. Ss table 9 shows, the net coverage is expanding steadily in the nonbasic type of benefits-drugs, dental care, nursing services, X-ray and laboratory examinations-having more than doubled for all ages in the past 11 years in every one of these categories. Dental insurance increased 21 times ; nursing- home care covered 14 times as many persons. For persons who are under age 65, the expansion into nonhospital, nonsurgical benefits reflects primarily group coverage of workers where unions have negotiated comprehensive and supplementary major medical insurance plans, extended-benefits plans, and supplementary major medical plans by Blue Cross-Blue Shield, and comprehensive group- practice prepayment plans. A good portion of the expansion in dental insurance, however, can be claimed by the independent dental service corporations, which have grown rapidly in the past several years.

TABLE 8.-Benefits for hospital care and hysicians’ services: Net number of different persons covered, g y age, as estimated by household surveys, 1962-73

Year

1962. __ - _ - -. ;66i& :::.:-: 1970...:.:.. 1972 _____--. 1973 ____---

1962 __----- 1967 ___---- 1970 -__---- 1972 ___-__- 1973 -__--- -

[Numbers In thousands1

I Physicians’ services

Hospltal care

Surgfcel services I

OWce and home visits

Peroetent Perocnt Peroclent Number cpio;lz Number CT;:: Number $f;‘;;

tion tion tion -

Aged 65 and over

9,125 54 1 7,792 46.2 ___.______ __________ 8.647

10,452 ;: : 8,376 44.1 ._________ __---_--__

66’ 4 9,496

!E y$ 17.3

11.944 11,203 19.1 1 12,336 ’ 67.4 r11.561 $53:6 ’ 4:153 19.3

I 1

1 Estimated b applying HIAA percentageincrease innet enrollment from 1972 to 1973 to rs CHS figures for 1972

f In the Current Medicare Survey of the Social Security Administration, 69.9 percent of those enrolled for su

P plementary medical insurance were re-

P orted ss having private hospital nsurance, 50 4 percent as having surgical

nsurance as of Jan 1, 1974 Source Data reported by various National Center for IIealth Statistics

household surveys conducted during 1962-72

Major Medical Coverage

Table 10 reveals, for persons of all ages, the annual growth since 1960 in the net number of different persons under major medical plans by insurance companies and in the total Blue Cross- Blue Shield enrollment for such coverage. In- surance policies are written as supplementary major medical or comprehensive group policies, with the ratio more than 2 to 1 in 1973. Coverage of Blue Cross-Blue Shield plans written as major medical plans supplementing a basic policy out- numbered comprehensive extended-benefit plans coverage 10 to 1.

In 1973, almost 83 million different persons were covered by insurance companies under major medical plans; Blue Cross-Blue Shield plans covered about 37 million persons. About 10 million more persons were covered in 1973 for major medical expense than had such insurance in 1972; 73 percent of the expansion occurred in Blue Cross- Blue Shield plans. Although insurance companies continued to write more than twice as much major medical coverage as the Blue Cross and Blue Shield plans, the commercial carriers’ share of


TABLE 9 -Estimates of the net number of different persons under private health insurance plans and percent of population covered, by age and specified type of care, 1962-73

I I Physicians’ services I I I I

End of year

.

26 0 27 6 33 7 36 2 39 9 44 7 49 7 62 1 637 59 8

39 0 42 8 47 9

iif 58 0 646

67,832

8 687 70:03s

Nyg~mr (in thousands) ______________--____----.

1965 ___-- _ ___-_-__--___----_. ;;w-;- _ _ ______ ___ ___ _-___-_--.

___-_-___-_-__---___----. 1968.-.....-.-.....---------. 1969.............-.---------. ~!g. _ - - - _ _ _ _ -- - __ -- - -_ --- -.

__________-_-__---------. 1972.....---...-...---------. 1973. _____________---_-_---..

Pyg2yt of civilian population

‘3” 19 454 (‘1

l(i.263

12 253 l&475

70 0

$1 73 9

(‘1

(‘I75 9

(‘I74 9 75 a

4.975 ;gj 19: 046 28,044 32,392 38,636 45.460 69,152

1,006 3,100 4,227 4,679 5,821 8,510

12,210 15,348 17,904 21,626

I:;

lb! 174 133: 914 145,689 148.614

:;~:~~:

65 0 35 0

$1

?la 66

41 48 2 0 722 47 0 [i,’

$1 5 6 49 62 2 2 73 9 71 7 70 2 t:h 4

(I)73 6 72 72 3 2 :; : (‘I32 7 75 1 73 4 73 1 33 5

Under age 65

88,926 93,714

117,472 134,839 137.463 141,694 143,995

500 52 2 fM8 73 8 74 4 76 1 76 9

136.907 133,706 141,572 139,061

I%611 liI.505

1’411 309 146:089

l!? 448 145:352

77 0 75 2 78 9 77 6

(‘I73 6 (‘I76 9

(‘)77 0 (I)76 0 78 0 77 6

Ny$er (in thousands)

1968.:::::::::::::::::::::::: 1969...............---------- 1970. ________-_____---__----- 1971..--........-.----------- lQn..-...-..-..-..-.-------- 1973.....-......-...---------

Percent of civilian population 1967. ________________________ 1968-.--.-..-.--.-..--------- 1969. ________________________ 1970...-----...-....--------- 1971..--.---.-.-.-..--------- 1972- ___--___---_____-_______ 1973 ____--___-_______-_______

fit 13 2 16 4 18 1 21 El a3 4

4,596 5,719 8,385

12,079 15,155 17,608 21,392

73,857 81,309 88.024 97,017

f%Z 115:175

I- Aged 65 and over

2.381 2,125 4,082 5,021 El.202 6,473 6. b31

lb 2 11 0

iii”7 25 0 25 8 30 3

3,518

‘1 045 4:158

(9

t417 3

(‘i9 1 19 3

Number (in thousands) 1967. ___________________.____ 8,547 8,376 1968..--.-..-.-.--------.---- (‘1 1969.....--.-..--.-.--------- 1970.....--.-..-..-.---.----- ’ 10,452 1971_______________-_-_______ (1) 1972- ________________________ 11,944 1973-. __--_____-___---___---- 12,386

P”;9”6”7”” of civihan populatron ____--____--___---__I____ 45 0 441

1969 _________________________ 1970- __ _- ____ _ -_ -_ _ _ __ ---___ 51 4 46 7 1971____ _ ________________-___ (‘) 1972. _ _ _ _ __ _ _________________ 56 4 (l)b2 9 1973-. _.-_____---_---_-_---- 57 4 536

2,470 2,826

K: 4:025 4,488 4,816

13 0 14 6 17 6 18 8 19 4

;5 z

3,654 3,989

?G yg

8:802

18 7 20 6 38 3 37 4 37 3 36 6 408

1.838 2,532 2,925 3,230

xi 3:934

2,223 2.176

1: : :: i 14 9 16 2 15 9 15 8 15 9 15 8 16 6 16 a 18 5 16 3

1 Data not available

the market has been slowly diminishing since 1068 when they held almost four times as much.

in table 11. Enrollment for hospital care rose 4.8 percent in 1073 ; the growth rate for this service had averaged 5.2 percent in the previous 0 years. Enrollment for physicians’ services showed the -

Enrollment in Group-Practice Prepayment Plans same trend. The rate of increase in coverage for oilice. clinic, and health center visits slowed from

Enrollment in independent group-practice pre- an average ‘of 3.0 percent in the period 1053-72 payment plans for the period 1053-73 is shown to 3.4 percent in 1973. For in-hospital physicians’

28 SOCIAL SECURITY

visits the corresponding rates were 3.8 percent and 3.2 percent, respectively. For surgical care, enrollment slowed from a g-year average of 4.4 percent to 3.6 percent in 1973.

It remains to be seen whether the Federal program for research, development, evaluation, and technical assistance to health maintenance organizations (HMO’s) will have a significant impact on the growth of longstanding independent group- practice prepayment plans. The experimental HMO development program2 initiated by the President’s 1971 Health Message was brought to a close with the passage of the Health Main- tenance Organization Act of 1973, which insti- tuted a 5-year $375 million program for the assistance of HMO’s8 As of the end of 1973, Blue Cross-Blue Shield plans reported 42 new group- practice programs. A total of 56 of their member plans were involved in various stages of alternative delivery-systems activity.4 Fifty-two insurance companies were known to have some degree of active involvement or exploratory in- terest in 74 HMO developments. Nineteen of the companies were participating in 22 operational HMO’s representing 23 communities scattered over 25 States.s According to a general survey of 99 HMO’s conducted in 1973 by Interstudy, private insurers (Blue Cross-Blue Shield plans and insurance companies) sponsored or were one of several sponsors for 27 of the 77 reporting HMO’s delivering prepaid health care in 1973.

The HMO’s are designed to provide enrolled participants-either directly or through arrange- ments with others - comprehensive, quality- assured, and economical health care services (including preventive care) in return for a pre- determined periodic payment. They afford the opportunity for the Blue Cross-Blue Shield plans and for the commercial carriers to supplement their traditional forms of health insur-

*Health Maintenance Organkatton Program Status Re- port, February I, 1974, Bureau of Community Health Services, Health Services Administration, 1974.

“Marjorie Smith Mueller, “Health Maintenance Or- ganization Act of 1973,” social Security Bulletin, March 1974.

‘J. Sonnenfield, Blue Crosa and Blue Shield Activity in Alternative Delivery Systems, Blue Cross Association, January 1974.

‘David A. Descoteau, HMO’s and the Private Health Insurance Sector, Health Insurance Association of America, 1974.

a HMO’s in 1973, A National Burvey, Health Policy Division of Interstudy, February 1974.

ante and offer their group policyholders a dual choice option for their employees.

This article includes the HMO’s whose major sponsors are consumer groups, physicians’ groups, hospitals, labor unions, medical schools, and private corporations-where such sponsors arc also at major financial risk for prepaid care-in the “independent plans” category with other non- insured, non-Blue Cross-Blue Shield plans that either do not provide the wide range of health services required of HMO’s and/or are closed plans (employer-employee-union plans, for example, that serve only union members and their families). HMO’s with sponsorship and risk and surplus sharing primarily by Blue Cross-Blue Shield or insurance companies are included in the statistics for the latter organizations.

FINANCIAL EXPERIENCE

The discussion of the financial experience of private health insurance organizations in 1973 that follows will give the reader background data for an understanding and evaluation of the operating experience of the various insurers. Data are provided on the business (premium and subscription income), benefit. expense (claims), operating expense, and overall operating results of the three principal types of insurers-the commercial carriers (for group and individual business), Blue Cross-Blue Shield plans, and the independent plans. These data are drawn together to show some comparisons of operating results-the proportion of premiums returned in benefit payments to the insured, investment income, operating costs, percentage of premium income retained for operating expense, additions to reserves, and profits. Trends in the distribution and growth of premium income and benefit expenditures by type of insurer and by specified type of care are reported, as well as changes in operating+xpense ratios over the past 12 years.

\ In 1973, private health insurance organizations collected $24.5 billion in premiums an&l subscription charges from their policyholders and subscribers ; $21.6 billion or 88 percent was returned in claims and benefits (table 12). Operating expenses amounted to about $31/ billion or 13.7 percent of premium income. The net underwriting loss was 1.8 percent of premium income, a loss


TABLE IO.-Number of persons covered under major medical policies of insurance companies and under supplementary major medical and comprehensive extended-benefits contracts of Blue Cross-Blue Shield plan<, 1960-73

[In thousands]

Insurance companies T End of year Group polMes

1960 ___________ ______- __________________ _ 1961-_--_______ -_-___- _____ ___ __ -- -______ 1962 _____________________________________ 1963 ____-__-_________-___________________ 1964 _____-_______________________________ 1965 ___-_-_-_________-___________________ 1966 _____________________________________ 1967-. ___________________________________ 1966 ___-_----_____-__--__________________ 1969. __~-~-~~~_~_~___~~~~-~--------~~~~~~ 1970 _____ __- ___.____________________ _____ 1971_____________________________________ 1972 _____-_-____________--------------- *_ 1973 _____________________________________

22,636 28,229 32.091 36,107 40,301 45,374 49,922 65.150 69.270

$02

:x 74:060

17,285 23.625 27,297

22: 40:646 44,821 49,581

E*E 59:011

1 Comparable data not available for earlier years, before 1965. data shown are for Blue Cross plans only, beginning 1965, data Jointly develo

$ d by

Blue Cross Association and National Association of Blue Shield P ans on unduplicated number of persons covered.

* Data not available * Data for Blue Cross plans plus an estimated 1,600,CHl in Blue Shield plans

not affiliated with Blue Cross

made up for the most part in income from investment of reserves. Because total income figures for the commercial carriers with respect to their health and medical expense business are not available, the net income for all private health insurance organizations cannot be determined.

Insurance companies had a premium income of $11.7 billion-only about a half-billion more than that of Blue Cross-Blue Shield plans, but six times that of t,he independent plans. The ratio of claims paid to premiums for group and individual business combined was 84.9 percent, compared with 90.5 percent for Blue Cross-Blue Shield group and nongroup plans. The independ- ents had the highest claims ratio-94.4 percent. Insurance company group policies returned almost 93 cents on the dollar to policyholders. Losses indemnified by individual policies-accounting for about a fourt,h of the health insurance business of the commercial carriers-amounted to only 59 cents of the premium dollar. Separate financial data are not available for nongroup business of the Blue Cross-Blue Shield and independent plans.

percent of premium income. The ratio for group business was 13.0 percent. One cannot measure these ratios for the companies against the ratios of the other insurers-5.2 percent by Blue Cross plans, 11.5 percent by Blue Shield plans, and 7.6 percent by the independent plans-without taking into account a number of factors.

The experience of individual business of insurance companies also heavily affected the overall operating expense of the companies. The $1.3 billion operating expense of individual business represented more than half the total operating expense of the carriers and accounted for 47 percent of the premium dollar, resulting in an overall operating expense ratio for all business of 20.9

Insurance companies usually sell a package of benefits including both hospital and medical expenses as well as major medical expenses. The operating expense ratio on surgical-medical coverage is substantially higher than the ratio for hospital coverage mainly because of the lower premium, the larger number of claims per enrollee, the smaller amount per claim, and the greater complexity of administering and paying surgical-medical claims than that for hospital claims. Major medical insurance is regarded as the most costly type of coverage to administer. The resulting higher administrative cost of the companies is further augmented by higher acquisition costs and selling expenses than those incurred by the other plans and the payment of Federal income taxes and State premium taxes and licenses and fees not required of other private health insurance organizations. These higher expenses are offset to some extent in the case of group insurance contracts covering large groups of employees, where virtually all the claims administration work is performed by the employer or welfare fund.

These dissimilarities in operating costs, along

20 SOCIAL SECURITY

Compre- hensive

12.741 13,911 15,301

22: 19:8W 21,723 22,952 24,442

- I

Individual policies

1.840 2,764 3,461 4,077 4,954 6,282 6,354 6,398 6.786 6,395

Blue Cross-Blue Bhield plans 1

Total Supplemen-

tamVed?:$

3,713

y&b;” .

’ 14,600 :%i

p& 24:905

26,780 30,082 37,328

3,020

4,015 6,088

I ‘)

40 409 12:4Oa 14.078 21,658 16,606

23,429 26,379 33,947

Compre- hensive

extended benetit

693

::%

Table Il.-Private health insurance enrollment under independent group practice prepayment plans, by specified type of care, 1953-73

Year

1953 _-____. 1956 ---__-. 1959 ----__. I.961 ------. 1964....... 1966....... 1967 _ _ _ _ _ _ . 1968.. _- __. lQ69- __ __ 1970. _ - _ _ _ . 1971. ___-_. 1972. - _ - - _. 1973. ______

-

-- ._ ._ .- .- ._ ,_ ._ ._ ._ .- ._ ._ .- -

Aospital care

1,802 2,428 2,626 2,686 2.695 2,771

22: 3:730 4,131 4,416 4,679 4,805

T

--

-

[In thousands]

Physicians’ services

Surgical services

2.410 2,507 3,399 3,400 3,643

%! 3:760 3,730 4,210 4,532 4,880 5,123 5,288

2,853 3,395

i%,” 3:844 4,158 4,480 4,404

xz 5:630 y-;

Dental care

452 248 318 398 438

(1)

(‘km

E 965 977

1,001

Drugs

11

518 889

(1)

‘? 382 1:720 2.121 2,321 2,543

2 1,741

1 Data not available 1 Excludes those enrolled under plans that sell drugs to members at reduced

rates

with the lack of homogeneity in other health insurance services-over and above pure health insurance-provided the individual by the commercial insurers, Blue Cross-Blue Shield, and other health organizations make it difficult to use ratios for comparing efficiency in delivering health insurance.?

Insurance companies showed a net underwriting loss in 1973. Their claims and operating expense exceeded their premium income by $682 million or 5.8 percent of premium income. In the previous year their claims’ and operating expense ran 5.0 percent above premium income.

Blue Cross plans showed a net underwriting gain of 3.4 percent of premium income, up from 2.8 percent in 1972. Blue Shield plans, however, experienced only a slight gain in subscription income over total expenses-O.4 percent of premium income, compared with 1.5 percent in 1972.

Independent plans had a net underwriting loss -their total expenses amounted to 2 percent less than subscription income. In 1972 they had experienced a slight underwriting gain.

In 1973, subscription and premium income for all private health insurance organizations rose 9.7 percent, and claims went up 10.7 percent. Op- erating expenses dropped only slightly. The result was a net underwriting loss of $137.5 million or 1.8 percent of premium income. Benefits in-

’ Ronald Vogel and Roger Blair, The Costs of Admin- istering Health Insurance: An Econometric Analysis, Office of Research and Statistics (forthcoming).


curred rose faster than premium income for all insurers but the Blue Cross-Blue Shield plans. In 1972, for all private health insurance organizations, there was a gap of 3-4 percentage points between benefits and premium income.

Blue Cross-Blue Shield plans were the only insurers that did not experience a net underwriting loss. Their gain of $280 million above expenses, plus their investment income from reserves, resulted in a net income of $496 million- 4.4 percent of total income. The favorable underwriting experience of these plans, in comparison with the other insurers, was a reflection of their lower operating expense ratio and the fact that they were the only insurers whose premium income rose faster than benefits.

Group business of insurance companies was fairly stabilized. Its claims and operating expense ratios were only slightly lower in 1973 than in 1972; as a result its net underwriting loss ratio dropped only about 1 percentage point. The underwriting experience of individual business changed sharply. Premium income rose 5 percent in 1973, and claims increased 17 percent. Fifty- nine cents of the premium dollar-compared with 53 cents in 1972-was paid out in benefits. Oper- at,ing expense remained at 47 percent of premium income. As a result, the underwriting results $or individual business shifted from a slight gain in 1972 to a loss of 5.6 percent of premium income in 1973.

Independent health insurance plans provided greater returns on the subscriber’s dollar than they did in 1972. Communit,y plans paid out 97 cents on the dollar in benefits; employer-employee- union plans spent 95 cents. In 1972 the ratios were 92 cents and 94 cents, respectively. Their operating expense ratios remained about the same. Because of these factors, plus a slower rise in subscription income than in benefits, they showed a net underwriting loss of 2 percent of subscription income. Investment income pushed their net income to 4 percent of total income.

To get a realistic picture of the overall financial results of the commercial insurers, one needs to know the net gain from operations. Unfor- tunately, separate figures for the commercial carriers are not available for the two segments of business-medical and health expense insurance with which this article deals-and wage replacement insurance. The reader will, however, get

TABLE 12.-Financial experience of private health insurance organizations, 1973

Total __________.___________

Blue Cross-Blue Shield ______._ - Blue Cross __________________ Blue Shield __________________

Insurance companies. _ ______._ Croup ohcies _____________._ In&vi 8 ual policies __________

Independent plans ____________ community ________________- Employer-employee-union... Private group clinic _________ Dental service corporation-..

[Amounts in millions]

Claims expense Operating expense

I

Net underwriting gain

I I

Net income

I

$24,532 3 1 $21,614

3; ; 367 6

2,446 4 1,166 1 1,266 3

‘Z :

“3” : 248

i”z 11 6 109 13 0 47 0

ii

1: : 10 8

1. Data not available.

some indication of the true financial picture of Total Premium and Subscription Income and the companies by examining the following figures Benefits

Operating results 1

Item I I Amgnt PeGrcGt.0

millions) bution

Income, total ____________________----------------. Premiums and considerations __________________. Investment income ____________________--------. Otherincome.-.-..-.......-------------------~

Benefit expense, total ____________________--------. Benefits-....--...----------------------------~ Increases in *eserves ____________________-------. Transfers on account of group package policies

and contracts.--..-------------------------. Other loss items- ____________________----------.

Operating expense _______________________________ Net gain before dividends 2 ______________________ Dividends---.----...---------------------------- Net gain after dividends and before income tax... Income tax.-..-............--------------------- Net gain after dividends and income tax _________

Aggregate reserves _________________ _______________ 1

$9,009 1 loo 0 0,729 2 ----__----__

265 7 ____________ 14 2 --_-__------

7,292 2 6,996 4 ________ “”

180 2 --____-__--_

-423 7 ----__------ 74 3 ----__---.--

1,442 1 16 0

:z f _______-_---

13 2;; ; --__--_-----

Ii56 7 :!:

1 Data are for both medical expense and loss of income Insurance-group . and individual business combined

2 Total income minus sum of total beneflt expense plus operating expense. Source “Liabilities, Sur lus and Other Funds,” page 3 and“Analysis

Tf$peratious, by Line of l? usiness,” page 5, Annzlal Stalc&ta for fhc Year

on loss of income and medical expense insurance business combined, for 1’7 leading commercial writers.8 The figures show net gain after investment income and payment of Federal income taxes on such income.

‘The 1’7 leading writers represented wrote more than half of all health insurance business (premiums earned less dividends) in 1973. The six leading writers of group business had each earned premiums of $340 million or more; the six leading writers of individual business had earned premiums of $70 million or more ; the five leading writers of group and individual business combined had $479 million or more of earned premiums.

32 SOCIAL SECURITY

Of the total premium and subscription income of the industry, insurance companies received 48 percent, Blue Cross-Blue Shield plans 45 percent, and independent plans 7 percent (table 13). There was a very slight shift in the distribution of business toward Blue Cross-Blue Shield plans. The carriers’ share of claims expense continued to be slightly smaller than their share of premium income; the converse was true with respect to Blue Cross-Blue Shield and independent community and employer-employee-union plans.

In 1973, for the first time in 19 years, insurance companies’ share of claims expense ran slightly less than that of the Blue Cross-Blue Shield plans. Since 1948, insurance companies have consistently received the largest share of premium and subscription income. The group business share of benefit expense has been running about five times the share of individual business for the past 6 years.

Benefit Expenditures

Sixty-two percent

and Types of Care

of benefits paid by private health insurance organizations were for hospital care and 31 percent were for physicians’ services (table 14). Only 7 percent of total claims paid were for other types of care. The average consumer received only a small financial return from health insurance for dental care, drugs, nursing services, and other types of out-of-hospital care.

Blue Cross-Blue Shield plans paid out $6.9

TABLE 13.-Percentage distribution of subscription or premium income and claims expense, by type of private health insurance organizat,lon, 1948-73

Blue Cross-Blue Shsld plans Independent plans

,

Subscription or premium income I- -

-

-

-

z 41 0 42 5 42 0 42 1 42 2 42 1 41 7 41 0 41 0

2: 42 9 447 44 4 45 1

iz i 28 9 30 4 30 0

5%

29 9 29 2 29 1 28 4 29 8

E 31 6 32 1

1: : 12 1 12 1 12 0 12 2 11 9 12 1 11 8 11 8 11 9 11 8 12 2 12 9 13 0 12 8 13 0

48 8 46 8 61 7 61 8 61 4 51 4 61 4

i:: i 62 9

ii : 51 6

E 48 8 47 7

24 2 21 1 19 2 15 8 15 2 14 9 15 2 15 1 15 6 15 2 14 3 13 7 12 8 11 5 12 0 11 6 11 1

194X.. ~~--~~~~-~~~~~~-~~--~~~ 1950--.--.----..--.----------- :2 : 1955--.--.---.-.--..---------- loo 0 1960 __---______ _-_ --_ _-__ - -- -- lQt?l___________.-_---_________ :i i 1962 ___________ __ __ ___ ____ _ ___ 100 0 1963 __--_ -__ _______ _-___ _--_- _ ml 0 1964 ____________-_-___________ 199 0 :96;: _-_-____-_ ________ _ _- ---- 100 0

____________________----- 100 0 1967-.. _-_ -___ __-_--- _ ----- --- loo 0 1968 ______--____---_---_------ 109 0 lsBQ...~....-..~.-.~---~~----- loo 0 1970 ____________---_--__------ ml 0 1971____________----____------ loo 0 1972 ____________-_____________ loo 0 1973 __._-___-___-------_------ ICC 0

23

24 4 25 9

ii 0” 38 1 38 7 38 3

ii:

2: 42 7 40 9 41 3

El ; 38 6

1: i 12 4 12 8 12 6 13 1 12 4 12 6 12 1 12 0 11 7 11 6 12 5 13 0 12 8 12 8 13 0

1948 __.~~~~~~~~~~~~~~~~~~~-~-~ 100 0 1950--....-....-....---------- 100 0 y&~ -:------------‘--‘------ 100 0

_ __-_____------_-_----- 100 0 1961_________ ___ -- --- -- ----- -- 100 0 1962.....-.-..-.-............. 100 0 1963 __________________________ loo 0 1964 ____________--____-_______ 109 0 1965 ____________-______-______ 100 0 1966 __________________________ 109 0 1967 __________________________ 1M) 0 1968 ___--~__~-__~~~~~~~~~----- 106 0 1969 __________________________ 100 0 1970 _____~______~~~~~~~~-~---- loo 0 1971_____~_~____~~~~~~~~-~---- 100 0 1972 __________________________ 100 0 1973..-..-.-....--..---------- 109 0

Ei 4.5 2 45 8 45 4 45 6 45 6 45 6 4i 8 43 5 42 8 42 7 45 2

2; 46 1 46 3

1 Data not available. , * Less than 0 05 percent

billion in hospital benefits to their subscribers and $2.8 billion for physicians’ services. These benefits accounted for 96.4 percent of all their benefit expenditures. Their outlays for dental care and out-of-hospital drugs accounted for less than 2 percent of total benefits.

a different set of services; they provide comprehensive medical and health care services outside the hospital, and thereby minimize the need for expensive hospitalization.

Ninety-two percent of all claims ($9.1 billion) paid by the insurance companies were for hospital care and physicians’ services. Their benefit payments for other types of care mere mostly for dental care (2.5 percent), drugs (2.9 percent), and private-duty nursing (1.9 percent).

Trends

Independent plans spent a larger proportion of their total expenditures for dental care and prescribed drugs than did Blue Cross-Blue Shield plans and the insurance companies. They also spent relatively more for physicians’ services- 41 percent of all expenditures, compared with 33 percent by the carriers and 28 percent by Blue Cross-Blue Shield. The independent plans offer

Data are presented in table 15 on the premium income and benefit expenditures of private health insurance organizations from 1948 to 1973. The economic stabilization program continued to be a factor throughout 1973 in the slower rate of growth of both income and benefits. During the year, medical prices-which reflect in part both premiums paid by consumers and claims paid in their behalf-rose at an annual rate a little more than half that reported during the prefreeze period. In 1973, premium income slowed to a 9.7- percent increase; it had risen 14 percent in 1971 and in 1972, and in the previous 5 years it had


TABLE 14.-Benefit expenditures of private health insurance organizations, by specified type of care, 1973

Other types of

oare

Total ______________________

Blue Cross-Blue Eihield ________ - Blue Cross __________________ Blue Shield __________________

Insurance companies ___________ Group policies __----_________ Individual policies ______ _____

Independent plans ___________ L Community -________________ Employer-employee-union--- Private group clinic __________ Dental service corporation __

$13.339 2 $6,774 9 $519 8 $528 0 --

pm& ;

‘156 0

2,;;: i 230 1593 13 2 13 5 75 3 RR

2,498 7 24: 0”

84 0

:%! :: 3,290 1 2wlo

1:104 2 2,863 6 249 0 287 6

421 6 ____________ 633 7 689 8 247 8 2: 212 5 411 4 22 8 22 1 415 7 269 0 22 6 56 6 4

66 94 2 2 _________-.. Cl ._-__-_____ .______-__-_ m 2 --_--______ _

I

1 1 I I I I I I

Percentage distribution

$21,614 1

10.004 2

2% i 9:930 0 8,333 0 1,697 0 1,679 9

E : 17 7

2002

$197 8 die 4 $220 4

El 132 70 3 7 18 61 6

I 9

(3 E

1.1

;i % 11 2

1 6 ____________ ____________

Total ______________________ I 1cfJ 0

Blue Cross-Blue Shfeld... __ _ ..I- Blue Cross __________________ Blue Shield __________________

Insurance wmpanles ___________ Group policies _______________ Indwidual policies ___________

Independent plans _____________ Community _________________ Employeremployee-union--- Private group clinic _________ Dental service corporation..-

31 3 t 24 1 241 09

27 9 .2 8:: : i

:i :

:i il: 36 :I

-___________ 2 42 41 1 14 7

E 33 3”; 531 1; : -_______ 1.”

: 1

_-_____--__ loo 0 ___________: ----- 11_---.

1 Included in “other types of care ”

increased at an average annual rate of 11 percent. Insurance companies showed the lowest rate of increase in 1973-and the biggest drop from the previous year-7.2 percent, compared with 13.6 percent in 1972. Blue Cross-Blue Shield subscription income rose 11.4 precent, compared with an increase of almost 13 percent in 1972. Sub- scribers paid independent plans almost 16 percent more than they did in 1972, but the rate of increase was more than 21 percent.

Benefit expenditures for all insurers remained fairly stable-they rose 10.7 percent, compared with 10 percent in 1972. The rate of increase had been 12 percent in 1971 and 20 percent in 1970. Insurance companies incurred 8.9 percent more in claims than in 1972. Blus Cross-Blue Shield benefits were 11 percent higher than in 1972. Thus, the gap betn-een the rates of increase in benefits and insurance premiums and subscriptions narrowed in 1973. Benefit expenditures resumed their prefreeze trend. They rose a little faster than premium income, although they did not approach the 20 percent/l7 percent ratio of 1970.

The financial experience of Blue Cross and Blue Shield plans is shown in tables 16 and 17. The data, based on reports of the 74 Blue Cross and 70 Blue Shield plans, exclude data for the in-

34

01 I 01 10

2 Less than 0 06 percent

surnnce companies owned by the associations. The data relate to the financial experience of the individual Blue Cross and Blue Shield plans and are not adjusted to eliminate the duplication with respect to the six joint plans that report identical data to the two national organizations.

A stabilized operating expense ratio and claims expense ratio in 1973 brought the net income of Blue Cross plans up to $438 million from $320 million in 1972. Reserves were also increased substantially (40 percent)-from $1.05 billion to $1.46 billion.

Mue Shield plans paid a slightly higher return in benefits than in the previous year. The operating expense ratio remained the same as in 1972. Subscription income rose 15 percent. Thus, the Blue Shield plans experienced only a slight underwriting gain. Their net income (including investment income) dropped 20 percent from the previous year.

Table 18 shows the distribution of benefit expenditures by all private insurers for hospital care, physicians’ services, and other types of care. The proportion of benefits for nonhospital, non- physician services continued its slow but steady increase-6.9 percent in 1973, compared with 6.1

SOCIAL SECURITY

percent in 1972 and less than 3 percent in earlier years-an indication that insurers are gradually broadening and deepening their coverage for health care services. The slowly decreasing share of expenditures for hospital care that has been running at least twice the share spent for physicians’ services reflects added ambulatory services recently offered by the insurers.

I Operating expense per enrollee

$4 38

iii 6 14 4 46 4 75 4 85 6 31 6 65 7 82

1: t 11 05

Yea* Blue Blue

Cross ’ Shield

‘: i: “: 8’: 1 95 2 01 2 07 2 12 218 220 2 43 2 38 2 72 2 61 3 11 3 01

363 “3: 4 15 4 56 4 44 6 05 6 07 6 49 5 69

1961... ____-__-_----___--_------- 1962.--.-.--.-......------------- 19+x-. ____--_--_ __ ------------ -- 196-4 _________--__ ___ ~~~~~~~~-~-~~ 196.L. _________--________.------ 1966. ________-___-___-___-------- 1967 _______-_-_____-___---------- 1968 _____ ____ -___ - __ ___ -_ -- ------ 1969 ______________ __ _ __ __ ___ _____ 1970 ___-_ __ __- __ ____ _ ____ _- ------ 1971______________-______________ 1972 ____________.__-_____________ 1973 ___--_-_ ___. - _ ___ __ ___-- -- ---

Percentage change, 1961-73, average annual. _____________

1972-73-.... .---------+--------

Operating Expense

As the data below indicate, operating expense as percent of premium income for all insurers decreased slightly in 1973. Blue Cross plans have

1 Duphcation due to the fact that some plans are joint Blue Cross and Blue Shield nlans and renort the same data to both national organizations has not been~elimlnoted -

Source Derived from the data on gross enrollment and financial experience in the annual articles on private health fnsurance, Socfol Security Bd- &fan, February issues.

Operating expense as percent of premium income - I Insurance

companies Ind$enlent Blue Cross-

Blue Shield r

Administrative expense-which for the carriers involves commissions, taxes, licenses, fees, and generally higher acquisition costs than those of other insurers-is also affected by such factors as intensity of claims review, increases in the number of claims or the number and types of plans offered, the demographic characteristics of the enrollees, and eficiency of administrative proce- dures.

-

El-

232 22 6 22 8 22 4 21 8 21 5 21 4 21 6 21 3

z 21 4 2u9

-

‘,1” ual

46 6 46 1

ii: 44 0

:i : 46 7 43 6 46 6 47 1 47 0 47 0 -

-

fmul

-

13 4

:i ! 12 9 12 4 12 8 13 1 12 8

:i i 12 7 13 4 13 0

-

Year To- tal

Em- JOY-

er- em- hy- ee- nion

1962---:: $1 1961

--_

E::::: lP5 1965..-. 14 2 ;96;--.- 14 4

__-__ 14 a5 ;96$-:- ;: ;

1970:::.: 14 0 1971..... 13 9 1972..... 14 0 1973...-. 13 7

Net Cost of Private Health Insurance

The net cost of private health insurance to the American public was $2.9 billion in 1973, only 2.9 percent higher than in 1972. The net cost represents the difference between earned premium or subscription income of the insurers and benefit expenditures (claims expense) and is made up of operating expense and net underwriting gain (or loss). The amounts are retentions by the insurers to cover operating expenses, profits, and such additions to reserves not accounted for by de.ductions from premium income or inclusion in claims expense. The net underwriting gain is used for additions to reserves and profits. In years when there is a net underwriting loss, part of the retention is actually a deficit that is met from previously accumulated reserves or by borrowing. Thus, in 1973 retentions ($2.9 billion)-made up of $3.3 billion in operating expenses and $438 million in net underwriting loss-

1 B&e Cross-Blue Shield data are adjusted for duplication, except where noted

r Data for operatmg costs separate from net underwriting gain or’loss are not available

8 Onl data reported to national Blue Cross and Blue Shield organizations are avar able, these do not take into acwunt duplicatlonof data reported by T joint plans.

held their ratio for 3 years-the lowest ratio of any of the insurers. The unique position of Blue Cross plans in this respect has been discussed earlier. Insurance companies were able to reduce their operating expense ratio for group business from 13.4 percent in 1972 to 13 percent in 1973 ; their ratio for individual business remained stable.

When operating expense in terms of per enrollee cost is examined, as indicated in the tabulation that follows, insurance companies are seen to have consistently had the highest cost, although their average annual increase over the 12-year period 1961-73 and their increase in cost in 1973 were the lowest of all insurers.


TABLE 15.-Subscription or premium income and benefit expenditures of private health insurance organizations, 1948-73

[In millions]

I I Blue Cross-Blue Shield plans Insurance companies

Inde-

Total Blue

I I

Blue cross Shield Total

I I

Group Individual pohcies policies

YeaI Total

1948 __-___________-____---------------------------------- $802 0 1950 ________________________________________------------- 1955 ___-_-_---------_---____________________------------- :E : 1960 ----_-___-_-----_--____________ --_-_--_______________ 1961_____-___---------______________________-------------

a:341 0

1962 _---_--__--_----_-______________________------------- y;: f

;;w& :::---‘-‘---‘-‘--‘----------------------------------- .8:053 6 -_--__----__-_--__-_____________________---------- 8.983 6

1965 ___--_____--____---_____________________------------- 10.001 3 1966 ________________________________________------------- 10,564 1 1967 ________________________________________------------- 11,105 3 1968 ___-__-_--------_--_--------------------- ____-______- 1969 ________________________________________---- _________ E% ; 1970 ____ ____---_-_-__--__--__ __ _ __ _ __ __ __ ___ ___ __ _ ____ _. _ 1971________________________________________-------------

p; f

1972 ________________________________________------------- 22:363 0 1973 _____-_--__--__-_--_____________________------------- 24,532 3

-

-

-

-

-

--

-

~ -

1’

1.292 4 2,482 0 2,805 1 3,118 6 3,399 4 3,785 1 4,169 0 4,327 8 4,555 3 5,187 1 6,155 6 7,370 9 8,790 2 9,923 3

11,059 1

$315 0

% : 1,773 0 2,004 4 2.212 8 2,438 7 2,697 6 2,903 7 3.085 9 3,230 0 3,665 0 4,365 2 5,147 1 6,239 6

:: ! % : % i 960 7

:*% i 1:241 9 1,325 3 1,522 1 1,7@l 4

?E : !&56 4 3,197 0

1,022 5 2,104 0 2,414 0 2.708 0 2,913 0 3,297 0 3.665 0 3,937 0 4,270 0 5.159 0 5,685 0 6,774 0 7.2310 8.309 0 8,970 0

1,972 0 2,370 0 2.596 0 2,724 0

::i i E; 482 5

ii: i 008 3 641 3

2: ii -

933 1 1,067 9 1.267 9 1,634 7 1,779 2

Benefit expc mditures I-

1948 _________________________ _______ _____ _____ _ __ _ __ _ __ __ 1950 ________________________________________----.-------- 1955 _______------_---_-------------------------------.---

$606 0 991 9

2:2 : 5:965 4

:% i 7:832 1 8,728 9 9,141 8 9,544 8

11,343 6 13.068 5 15,743 5 17,713 1 19,526 4 21,614 1

YE 1,146 7 2,287 1 2,585 4 2,893 6 3,179 5 3,574 4 3,912 9

I$;;8 ; $8& ;

7:otxl 2 8,178 7 8,9Qil 9

10,004 2

$269 0

;;z ; 1,646 2 1,867 1

E 3” 2: 592 8 2,853 4 yg f

3:529 2 4.271 4

2% i 6:bOl 3 7,187 3

KG Y “& i 718 3 829 1 862 2 981 6

, 1,059 5 1,093 2 1,119 7 1,311 4 1.6317 2.050 9 2,271 8

%i i 1,179 0

xi : 3:012 0 ;.“7”;: ;

4:265 0 4.585 0

2% : 6:306 0 7,656 0 ;.;g ;

9:930 0

E i 321 0

~~~ ii 659 0

2: ! 862 0 874 0 839 0 950 0 957 0

1.146 0 1,274 0 1,366 0 1,597 0

E i 210 0

ii-ii 438 2 467 8 494 7 551 0

El t 712 0 859 4

1,027 4 1,193 4 1,415 5 1,679 9

1960 ___________----_--_----------------------------.----- I 1961________________________________________------------- I 1962 ________________________________________------- _ _____ 1963 _---_-_--------__-__________ ___ __ ____ _ -- _ -_ _-_ _____ __ 1964 -_-_ --- ___________________---- _ -_ -- -- - - _ _ _ _ _ _ _ _ __ __ -_ 1965. ____________________--------------.----------------- 1966 ___- ̂________________________________________-------- ,nnw

1968 ________________________________________------------- I gem: ::-‘---‘---------‘--------------------------- -__-___

-_-_-_-----------_______________________---------- 1971________________________________________------------- 1972 ________________________________________-*----------. 1973 __-______________-__---------------------------------

amounted to 11.9 percent of premium income (table 19).

Retentions for Blue Cross-Blue Shield plans were $1.05 billion, 13.1 percent higher than in

972. Tl ne : Blue Shield plans increased retentions by $13 million. Retentions for the carriers were about the same as in 1972. Group business retentions increased slightly to $637 million in 1973.

TABLE le.-Financial experience of Blue Cross plans, 1950-73 1

[Amounts in thousands] -

.b I

- I As percent of subscdptlon income

Earned

s”EiYp- income

::

2 21 16

.e

::

2; -2 0

-:: 44 53

Total earned Income

Claims expense

Operating expense Claims

expense Operating expense

Under- writing

gain

,

_-

-

Year Reserves

1950 ___________________________ 1955...----.------.------------ 1960. -_____________-_-_________

$116,531 254.407 363,253 410,658 45$6?6

2a 561:W6 649,633 797,575

%*i! 651:655 747,236

$36.281 58,368 90,821 99,269

%% 124:969 ;:, y;

177:632 ;y;

302:463

;;;90”g 436: 2iO

if 3” 92 8 93 1

3 0” 96 1 95 2 93 3 91 6 96 2 97 8 96 9 94 7 91 6 91 1

33

;: 19

: -7

3

io’ -1 9 -3 6 -2 5

(9

3”:

(li.371

i%; 63:b31 47.235 38,918 17,558 52,305

101.322 153,266 -7,008

-89,302 -55.613

65,168 gy34

1,60?,789 2,035,740 2.257,523 2,497,377 2.766.829 3.074.551 yp;

3: 776: 487 4,489,266 5,467,512 6,477,615 p&Q&4

, 9

1961. _ _--------_-_______-_----- I 1962 ___________________________ 1963. __________________________ 1964’...-.-.----.----.-.------- 1965 I-------------------------- 1966. ____-_________--____-~---- 1967. __________________________ 1968. _ ____ _______ __________ ____ 1969. _ _ ___ _____________________ 1970-...-.-.----.-------------- 1971.-..-...-..-.-.------------ 1972. _ ____ _____________________ 1973.. _________________________

* Data in all yean exclude Health Services, Inc , and are not adjusted for 1 Includes Puerto Rico duphcation between Blue Cross and Blue Shield 8 Less than -0 05 percent.

36 SOCIAL SECURITY

Individual insurance retentions declined by $103 million from 1972. For the independent plans, retentions dropped from $119 million in 1972 to $99 million in 1973.

PROPORTION OF CONSUMER EXPENDITURES MET BY INSURANCE

In 19’73, private health insurance met 41 percent of consumer expenditures for personal health care.Q If the net cost of obtaining health insurance protection-the difference between premiums and benefits-were to be added to expenditures, the proportion covered by insurance benefits would be lower.

The proportion of expenditures met by health insurance varies with the type of care as the data below indicate. In 1973, insurance plans

Year Total

1950-.-..--.....-.------- 12 2 1955..-..-...-....------- 21 7 1960.-...--.....-.-.----- 27 8 1961.............-..----- 30 1 ;96& ________ ______-._____

___--___------___---- i: z 1964.------..-.--.-.----- 31 6 1965...........--.-.----- 32 6 1966 ________-____________ 32 3 ;r9g _ _ - _ _ - - _ - - - - - - - _ - - - - 33 5

______---------__---- 36 3 1969-...---.......-.----- 36 6 1970- _ __ ___ _.- -__ ______ _- 1971-....-.....-..-.----- 2 : 1972 ______________.______ 40 2 1973..........-.....----- 40 tl

’ Included in physicians’ services

37 1 12 0 66 0 25 0 64 7 30 0 67.4 32 8

Ei: ii : 68 9 32 2

2 i 32 8 33 9

73 3 35 9 76 9 40 7 74 3 41 1 77 9 43 8 82 5 43 9 77 7 48 5 75 3 43 5

-- Other

types of cme

paid about 75 percent of hospital costs, 48 percent of physicians’ charges, but only 7 percent of the costs of other types of care.

PROPORTION OF ALL NATIONAL EXPENDITURES MET BY INSURANCE

Total national expenditures for personal health care (excluding expenditures for insurance premiums and administrative expenses of public programs, as well as for research, construction, government public health activities, and fund- raising expenses of philanthropic organizations) amounted to $85.9 billion in 1973. Private health

’ See Nancy L Worthington, National Health Expendi- lo Marjorie Smith Mueller, Independent Health Insur- tures, Calendar Pears 1919-73 (Research and Statistics anw PZUTM in 1973 (a forthcoming Research and Statis- Sote So l), Office of Research and Statistics, 1975 tics Note), Office of Research and Statistics, 1975.


insurance met 25.2 percent of this amount (compared lvith 25.0 percent in 1972), 36.4 percent came from direct out-of-pocket payments by consumers, 37.1 percent was met by public funds, and 1.4 percent came from philanthropy and industry. Thus, in 1973 private payments by consumers- out-of-pocket and through private health insurance-made up approximately 62 percent of the total national expenditures for personal health care.

TECHNICAL NOTE

Sources of Enrollment Data

Blue Cross and Blue Shield data are supplied by the Blue Cross Association and the National Association of Blue Shield Plans from data reported to them by individual plans. The data for insurance companies were compiled by the Health Insurance Association of America from its annual survey of the number of persons covered by insurance companies under group and individual policies.

Gross enrollments are reported by the Blue Cross-Blue Shield associations for all types of care for regular membership (under age 65) and for coverage complementary to Medicare (aged 65 and over and disabled members under age 65 eligible for Medicare). Major medical and extended-benefits coverage is reported for the combined age groups.

Gross enrollments for hospital and surgical care and regular medical expenses are reported by HIAA for persons under age 65 and aged 65 and over. In 1973, HIAA revised its 1972 figures for each age group and the data for 1960-71 for the combined age groups. For other types of services, HIAA reports gross enrollments only for persons under age 65.

For independent health insurance plans, the data are based on estimates from Office of Re- search and Statistics annual surveys of independent plans. Estimates for 1973 have been made on the basis of changes in enrollment in the larger plans from 1972 to 1973, as reported in the 1974 survey.‘O The results of a full survey of all known

TABLE 17.-Financial experience of Blue Shield plans, 1950-73 1

[AmOUntS h-i thousands]

Earned

Re80rW8 SubSCrip- Total ChimS

tion earned operating

income income eXpe!lSe eXpelMe

- I

1,399,890 L489.640 1.709.648

555.079 ;;;,o$

2,007,970 2.320,377

e91:445 3,282,927 2,814,696

791,147 3.761.845

%:p; 76: 245

xi: Qs:662

108,691 115,940 129,864 148,750 180,151 222.614 254,726 295,282 346,861 396,965

1 Data in all years exclude Medical Indemnity of America and are not adjusted for duplication between Blue Cross and Blue Shield

8 Includes Jamaica * Includes Puerto Rico but excludes Jamaica

plans that was conducted in 1973 will be presented in an Office of Research and Statistics research report to be published in 1975.

Gross enrollment figures are total enrollments reported by the various insurers, by type of care, with no deduction for duplication among insurers.

ORS Estimates of Net Coverage

The ORS estimates of net coverage for hospital and surgical care and for physicians’ office and home visits in 1972 are based on figures collected during 1972 by the Health Interview Survey of the National Center for Health Statistics (KCHS). As seen in the tabulation that follows, the data are provided for both the population groups under age 65 and those aged 65 and over.

Type of insurance coverage

Percentage di8tributIon of civilian n0nlnstitutional populstlon

Total Insured ,nyu;;d Un- known

I !

Under age 85

I

I I Aged 65 and over

Hospital _________________________ Surgical. _ _ -__-____-_-_--________ Office and home visits ____.______

Source Uupubhshed 1972 data from Health Interview Survey, National Center for Health Statistics.

The data on the net number of persons covered for hospital and surgical care before 1972 and for doctors’ visits (1970 only) are those reported by various NCHS household surveys from time to time during the periocl. The 1973 projections of the 1972 KCHS figures for persons under age 65 are derived from percentage increases from 1972 to 1973 in HIhA’s net coverage figures for hospital and surgical care and in its net coverage figures for group major medical coverage (for physicians’ home and office visits). For persons aged 65 and older, projections for hospital and surgical coverage were also derived from HIAA percentage increases in net coverage for that age group. The increase in physicians’ visits was as- sumed to be lolrer than the increases for hospital and surgical care since home and office visits are less frequently includecl in coverage complementary to Medicare than either hospital or surgical expenses.

38 SOCIAL SECURITY

TitG2:t Claims expense

I As percent of subscription fncome Net income

I I

as percent

Operating Under-

expense writing %% gain

The ‘<don’t knows” for both age groups were distributed in the same proportion as those who reported having or not having insurance, and the results were then adjusted to apply to the total civilian population on the assumption that none of the institutional population had insurance. Ko reliable data are available on the number of persons in institutions who have insurance, but it is believed that the overall proportion is very small. The data were next adjusted to reflect the situation at the end of 1972. The estimates did not assume any changes in the rate of coverage during the year and the end of that year.

TABLE 18 -Benefit expenditures of all private health insurance organizations, by specified type of care, 1950-73

Year

I I

IIospital g$- Other Total care

S0ChX?S types Of

care

$992 2,536 4,996 6,895 ;a;

7:332 8,728 9,142 9,545

11,344

2;:: 17:7L3 19,526 21,614

1950 -------__--___-______ 1955.. _____ __-___------__ %*i 1960... __- __ ___ __ ___ _ -- -_ 1oo:o lg81......-...-..-....... 100.0 1962. _ _ _____ _ _ _ _ ___ __ _ _ _ _ 1963 ---_-________________ :Ei 1964 ----__-______________ 1oo:o n6& -- --- _-_ __ _ __. _ _. -_ - 100.0

1s67::::::::::::::::::::: 100.0 100.0

1968 _-_---_--___________- 100.0 196g-----------~--------- 100 0 1970--.---.--............ 100 0 1971_____________________ 100 0 p;; __--_--- ______ _ _-____ 100 0

_.___--______________ 100 0

Amount (in millions)

$680 1.679 %:,’ 3,304 1.593 3,766 1,796 :*t:,’

5:137

2.153 1,992

2,427 6,790 2,630 6,993 2,331 6,134 2,964 7,329 3.477 8.356 4.0%

lo,008 4,908 11,279 6.430 12,242 6,088 13,339 6,775

Percentage distribution

E 155 185 218 259 318 447 633 684

l,E 1.196 1.5Gll

1 Included in “physicians’ services ”

Estimates of the net number of persons with coverage of other services in 1973 have been made by assuming the ratios of gross enrollment t,o the number covered, as shown in the tabulation be- 10~. The ratios are believed to be reasonable since

Type of insurance coverage

I- In-hospital visits. __ ______________________________ 118 8 X-ray and laboratory examinations .______________ 119 0

Prescribed drugs (out-of-hospital) _________________ 106 0 Private-duty nursmg _____________________________ 105 0 Visitmg-nurseservice-..-...---.-.---------------- 105 0 Nursing-home cars _______________________________ _ 102 0 Dental care.....-..--..-...----------------------- 100 0

the extent of multiple coverage is presumably much greater for hospital care and surgical services than it is for other types of health care.

HIAA Estimates of Net Coverage

The HIAA provides estimates of net coverage of persons under age 65 and those aged 65 and

BULLETIN, FEBRUARY 1975 a9

over for hospital, surgical, and nonsurgical medical expense coverage. The nonsurgical medical expense estimate is used for in-hospital medical visits. HIAA also provides estimates of net coverage under group major medical insurance policies. In 1973, HIAA revised its net figures for the separate age groups for the year 19’72 and for the two age groups combined for the years 1960- ‘il. Net figures are enrollments after deductions for duplicate coverage for persons with insurance company protection and for persons protected by more than one type of insurer.

Sources of the Financial Data

In table 12, the data for Blue Cross and Blue Shield plans are based on financial statements for all plans supplied by the Blue Cross Association and the National Association of Blue Shield Plans. Duplication result,ing from the fact that six joint Blue Cross-Blue Shield plans report identical data to both national organizations has been eliminated. Data for Health Services, In- corporated, and for Medical Indemnity of Amer- ica-insurance companies owned by the Blue Cross and Blue Shield associations, respectively- have been included.

IMa on premium income and benefit expense of insurance companies were provided by HIAB, based on the National Underwriter Company’s annual survey of accident and health insurance and its own survey of companies in this field. n’ational Underwriter data are U.S. totals adjusted to premiums earned and losses incurred. The I-IIAA adjusts these totals by eliminating Canadian companies. It then deducts premiums and estimated losses for accidental death and dismemberment insurance, as shown by its annual survey of 250 companies, and the premiums and losses of the two insurance companies owned by the Blue Cross and Blue Shield associations. The HIAA’s annual survey of premiums written and benefits paid by 250 companies is by line of insurance-that is, hospit,al, surgical, medical, major medical, wage replacement, and dental. The HIAA converts premiums written, by line, to premiums earned after dividends by using the ratio of its total premiums written to National Under- writer’s total premiums earned.

Benefits incurred, by line, were not available

TABLE 19.-Retentions’ of private health insurance organizations as a percent of subscription or premium income, 1948-73 *

I I Blue Cross-Blue Shield plans T Independent plans ’ -

1

_-

-

Indl- vidual

policies

Year Total

Total

--

1948 _____________________ _____ 16 6 1950 S-SqS-S--vS~q-*~~_ __ ______ ii: 14 6 1955 -___-_____--_--___________ 19 5 11 3

1960.. __ _ __ _-_ __ _ __ _ _ _ _ _ _ _ _ _ _ __ :: f

79 1961~~~~~_-_~~~_______________ 1962 ---_-_---_---_-___-_______ 14 4 2 1963 -_---__-__-_-_-________ ___

:i s” 66

1964. -- ----_-_-__--_____ ______ 1965 --________________________ 12 7 if 1966. ~~~-~~~~~-~~-~-~________ _ 1967 -_________________________ E 0” 1: : p3::: --_-___-___-__ _-_______ 12 1

____-__________________ 10 8 :: 1970. __ .__ _-_ __ _ _ _ __ _ _ _ _ __ _ _ _ _ 84 42 1971__________________________ 1972 -__--____________________ _ 1; ; E 1973 ---------_________________ 11 9 96

Blue Blue cross Shield

Group policies Total

45 8 33 9 27 6

21 1 21 0

E3: 19 1 18 4 18 1 17 4 16 5 16 7

:i f 16 4 15 1

::: : 49 3 46 0 46 6 45 3 45 6 47 2 46 4 49 2 41 9

E 41 4

‘:I 1 9

I ‘) 9

I 9 9 9 10 7 11 8 13 3

;i i

19 1 21 6 31 4

*Amounts retained by the organizations for operating expenses, additlons 2 Derived fmm table 15 to reserves, and profits. : Data by type of plan before 1965 not avaUable.

from HIAA for the year 1073. These figures were computed by ORS, by prorating HIAA total benefits paid to National Underwriter’s total benefits incurred. Operating expenses mere estimated by applying the ratio of operating expense to premium income derived from the Xational Underwriter aggregate+ to the HIAA figures for premium income. The data for independent plans, as mentioned earlier, are estimates of the

Office of Research and Statistics based on its 1074 survey.

U1973 Argus Chart of Health Inswance, National Un- derwriter Publication, 1973, page 112.

Data in tables 1’7 and 18 shorn the financial experience of Blue Cross plans and Blue Shield plans, respectively, based on reports of the 74 Blue Cross plans and the 70 Blue Shield plans. These data exclude Health Services, Inc., and Jledical Indemnity of America, insurance companies owned by the national associations. The data are not adjusted to eliminate the duplication with respect to the six joint plans that report identical data to the t\vo national organizations.

SOCIAL SECURITY

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